Have you ever wondered how to produce your product or service more efficiently?
Paul Akers is obsessed with continuous improvement, but he has a great time running FastCap using lean manufacturing principles. He took the time to sit down and explain how an idea to make cabinets look better turned into a company making over $36.5 million per year.
It’s a pretty awesome story! We’ll share his insights with you starting by explaining lean. We’ll also discuss how to come up with your first idea, principles of lean manufacturing, and examples of how to eliminate waste in business.
Keep reading to improve your business practices.
What is Lean Manufacturing?
Lean manufacturing focuses on two main principles:
- Eliminating Waste or “Muda” in Japanese
- Productivity Improvement.
Lean principles have their roots in the Toyota production system dating back to 1930. Japan lacked the space and resources to build the massive factories you would find in other countries. This led Toyota to develop just-in-time manufacturing.
Paul Akers was familiar with the lean manufacturing process from seeing a friend’s cabinet shop where they didn’t have cabinets made until they had an order. He didn’t really fully appreciate it until he had an experience where he couldn’t solve a problem at Fast Cap.
Paul told us:
He was able to reduce a process from 45 minutes down to 5 minutes in about a week, and it really improved the cycle time. After that, I jumped on a plane to Japan to learn what they were doing. Hear the full story here:
What is different about the Toyota Production System?
The Toyota Production System is described by Toyota as:
A production system based on the philosophy of achieving the complete elimination of all waste in pursuit of the most efficient methods.
It has two main approaches to improving a product or service – Just-in-time manufacturing and “jidoka” (loosely translated as automation with a human touch).
Keep reading to find out more.
Toyota applies just-in-time manufacturing by following several basic practices:
- Do not build until needed.
- Once an order is received, send production instructions to the assembly line as quickly as possible.
- The assembly line should be stocked with the exact number of parts to build any vehicle.
- Upon use of the parts, the assembly line should immediately replace them to be prepared for the next order.
- The company should keep a minimal amount of parts on hand to meet production.
Jidoka is a term coined by Toyota that focuses on automating the production process until a defect is detected. As soon as a defect is detected, production stops to eliminate waste. Once the process has been corrected, the manufacturing process is restarted.
What Are the Types of Waste in Lean Manufacturing?
Lean thinking focuses on the elimination of waste. So let’s look at what a lean enterprise would consider waste. There are 7 types of waste, but many lean systems also consider an 8th type of waste. The types of waste are:
- Unnecessary transportation
- Excess inventory
- Unnecessary movement of people, equipment, or machinery
- Waiting – either people or idle equipment
- Over-production of a product
- Over-processing or adding unnecessary features to a product
- Defects-part, product, or service doesn’t work properly causing increased costs.
- Bonus: Wasted talent
If you can’t already tell, most of these should save you money and hopefully increase your profit, but Paul thinks it is important to emphasize:
Let’s look at each and find out some ways that Paul Aker’s team improved them.
Unnecessary transportation is focused on moving something from one place to another. This is typically in regards to the supply chain.
One of the industries that are notoriously bad about eliminating waste in this area is the airline industry. If you’ve ever taken a plane from Dallas to Los Angeles to get to Vegas, that’s a waste of time and gas as you practically have to fly over Vegas on the way to LA.
Find the most effective, least costly solution to go from raw materials to the customer without negatively impacting value. If your supply chain has multiple stops before it gets to you, try to make each step in the production process bring the inputs closer to your location.
Reduce Excess Inventory
Excess inventory is wasteful because it requires more space to store inventory. The inventory referred to here is unprocessed inputs such as wood for a cabinet. Basically, you are only buying the raw materials you need to complete the jobs on hand.
Eliminate Unnecessary Movement
Every movement that is performed should add value to the customer. If it doesn’t, it’s muda. Paul tells us about several processes Fast Cap has implemented to reduce unnecessary movement, but one that really stood out to me was the use of different color lights.
Eliminate Wasted Time
Wasted time is one of the key ways to cut waste. As humans with finite life spans, time is one of our most valuable resources. A company cannot achieve the highest levels of success without respecting its resources.
Businesses measure wasted time using productivity metrics like Revenue Per Employee. At this point in time, automation is far less than the cost of an employee over 50 years, so businesses should be adopting automation to try to reach the point where employees’ primary focus is adding value.
Paul gave us an example of wasted time on a project creating custom parts for a customer. It was taking them 3 days to create the parts because the process required a lot of human activity.
The process involved a handle that had to be pulled down multiple times per product and a duster to clean the parts as the final step.
He told us:
This type of waste simply refers to producing more of a product than is needed at the current time. If you need 26,000 Fast Caps to complete the orders for the day, you only want to produce 26,000. Any more than that is waste because it will impact your storage needs.
This production process can create tremendous results in terms of productivity and cost savings, but you’ll need ways to make sure that orders don’t slip through the cracks during the process.
Fast Cap uses clipboards for expedited shipping orders. They only take the clipboard once they are ready to produce it. When they are starting to close for the day, they can easily make sure they completed the expedited orders by checking to see if any are missing.
A customer expects a product to serve a specific purpose, and how well it serves its purpose impacts how well the customer will value the product. You want to do the least production necessary to create value for the customer. Anything more than necessary is waste.
There are two key ways companies overprocess, including unnecessary steps to accomplish the goal of adding unnecessary features. We’ll be talking about reducing steps in much more detail later, but let’s look at lean manufacturing examples to prevent unnecessary features.
Let’s assume Fast Cap gets an order for caps for screws that go in oak cabinets. Providing a variety pack of different color caps would be an example of a wasteful feature. The majority of the caps wouldn’t be used while building the cabinets.
Respond when Defects Occur
Defects are anything that reduces the quality of the product. Today, recognizing defects will primarily be done with automation. If a camera detects a scratch on a Fast Cap, the cap should be separated before it is put in with the other caps.
If the defect could impact safety, the process should be stopped, and someone should conduct a root cause analysis of the situation. Once the cause is identified and corrected, the production cycle can continue.
Bonus: Don’t Waste Talent
In many companies, management thinks they know best, but a lean enterprise realizes that their people know their jobs best. They perform them every day and know where there is room for improvement. Innovation occurs when you empower that talent.
Paul told us that the best tool he found to eliminate waste is 3 S-ing. It stands for “sweep, sort, and standardize.”
This method empowers everyone to find areas for improvement in Fast Cap’s production process. Once someone finds a way to reduce waste in the business, they make it where the processes are easily repeatable by anyone in the company.
Lean techniques make it where everyone owns the continuous improvement cycle, making the business a place everyone enjoys being at.
What are the 5 Lean Manufacturing Principles?
The lean manufacturing principles go beyond the Toyota Way to help organizations that provide a product or service. The principles require a true system-wide focus on continuous improvement, but what are the 5 principles of lean manufacturing?
- Define Value
- Identify the Value Stream
- Create the Flow through the Value Stream
- Establish a Pull System
- Continuously Improve the System
Let’s look at each of these.
The first step to implementing lean thinking is to define value as it applies to your organization. In lean manufacturing, value is typically focused on what adds value to the customer, but different parts of a business have different customers. There are three main types of customers that an organization will have:
- Customers who buy a product or service.
- Regulators who require proof of compliance.
- Stakeholders who want proof that the improvement adds value as measured in profit.
Each of these customers will define value differently.
Customers pay for a product or service based on their needs and desires. Anything that does not meet their needs is considered waste. It should be eliminated. They care about the product and customer service. Anything else is meaningless to them.
Like Paul said,
Regulators are concerned with companies following the rules. The rules are there to protect employees, customers, or investors. Failing to abide by them can result in huge fines, lawsuits, and even halting company operations.
The cost of compliance in manufacturing is twice as high as most industries according to the National Association of Manufacturers. Unfortunately, this cost isn’t really part of the value stream as defined by the customer.
The value here is derived from several hidden costs:
- Cost of workplace injuries and deaths-According to the National Safety Council, workplace injuries cost $171 billion in 2019.
- Cost of product recalls – 4,217 product recalls in the U.S in 2015. According to SmartSense, food recalls can cost $10m/recall. Meanwhile, the Volkswagen recall cost $30 Billion.
- Cost of fines: OSHA can fine a company up to $136,532 per day, per violation.
Spending to avoid these costs through training, documentation, and preventive measures aren’t necessarily important to the customer, but they can definitely impact customers through increased costs or loss of service due to company closure.
Stakeholders are the people who are impacted by your company. They can be employees, stockholders, bondholders, the community you operate in, and more.
You want to make them happy because they can assist your enterprise in getting additional resources to fund long-term continuous improvement initiatives and that new major project you are considering.
The stakeholders might value removing waste associated with:
- Administration costs
- Sustainability practices
- Reducing debts
- Innovation management
These are initiatives that can help enterprise-level companies to increase value despite flat or reduced demand for products. If newer companies establish lean philosophy and lean methodologies from the start, it can help them grow faster because lower costs are typically associated with increasing margins.
Now that you know how to define value, keep reading to learn how to map the value stream.
Value Stream Mapping
The value stream is simply the process the company goes through that adds value. This will be different for companies depending on the products and services they offer.
Given lean started with a car company, I figure using manufacturing a vehicle with lean manufacturing principles is a great way to give an example of value stream mapping.
As you can see, the steps that add value to a car manufacturer are limited to 7 main steps. Some of the steps will have substeps that should be mapped out as well.
Once you have mapped out the value stream for production, you know which steps create waste, and you should remove them to improve your lean manufacturing system. Management may not be completely familiar with the processes, so make sure to include input from key employees.
If you’d like to learn more about value stream mapping, LucidChart has a great article that goes more in-depth on the subject of value stream mapping.
Create the Flow through the Value Stream
After you have identified the waste, the next step is to adjust your manufacturing system to provide a continuous flow through production. Implementing lean principles may require:
- Rearranging the manufacturing system
- Investing in new equipment
- Cross-training employees
The purpose of the changes will be to help your lean production to run smoothly. It should be noted that when you cut out steps that create waste, bottlenecks may form.
A bottleneck is simply the part of production that limits the throughput of the system. Bottlenecks are perfectly normal, and once you remove one, another bottleneck is likely to occur. Bottlenecks are waste that helps you easily identify where lean manufacturing productivity can improve.
Establish a Pull System
A pull system is one of the key lean manufacturing tools used to remove waste. A pull system is simply using demand to trigger production.
Companies that hold large amounts of inventory do not use a flow pull system. They focus on creating supply and expect to sell it. As we have already discussed, this is one of the 7 types of waste that should be eliminated when manufacturing lean.
Let’s discuss one of the most commonly used tools for implementing a pull system: the kanban board.
Use a Kanban Board to Manage Lean Production
The most common lean management system to operate using the pull method is the kanban board. Lean practices will vary based on the size and revenue of the organization, but a kanban board is a method of adding each order or project to the board and documenting the process through the cycle.
The low-cost method of a kanban board can be done on a wall with Post-its like the picture below.
Alternatively, you can use lean technology systems like Jira to manage each project with greater detail. Managing each project is simple with Jira, and they offer a free version that can support up to ten users.
The photo below is an example of a Kanban board from Jira that I use with one of my clients.
Paul told us about two of the processes Fast Cap has in place to make his approach to Kanban boards work for them:
“We use clipboards for expedited orders. That helps us know when there’s a high priority order we need to search the warehouse for to meet the shorter lead time.”
“We use color-coded order papers to specify which day the order came in. If there are multiple colors, then we know there’s a burden that needs to be addressed, and we adjust our processes.”
At this point, you know how to take the first steps to adjust your manufacturing to lean production strategies to reduce waste, increase quality, reduce cycle time, and provide world class services, but lean manufacturing doesn’t stop there.
Keep reading to learn the last step to becoming truly proficient in lean manufacturing.
Continuously Improve the System
Lean Manufacturing is more than just management jargon or a manufacturing strategy to improve productivity. Lean operations are known for their innovation.
The lean manufacturing method can be used in all types of businesses to improve productivity, processes, quality, and services.
Lean manufacturing is focused on continuous improvement. Management knows that you’ll never reach perfection, but it’s human nature to want to get better and better as time goes on. When processes are improved, new bottlenecks occur, which create more opportunities to remove more waste.
The world needs the management tools that are necessary to run a lean production system. Increasing productivity is one of the key tools companies and governments can use to keep inflation low.
The more efficient processes we use, the lower the cycle time, the better quality we can make those products and services.
Everyone should take some time to learn about lean manufacturing processes and how to implement them in your organization and project management system. Lean manufacturing will make each project run more smoothly.
Here are some references to learn more about lean manufacturing: The Toyota way, six sigma, and other tools for you to implement lean manufacturing in your workplace:
- Toyota Way 2020 Update
- Paul Akers Twitter Account
- Lean Six Sigma Institute – Has information focused on lean manufacturing and other industries ’ approaches to using lean and six sigma to add value to their lean processes.
We hope the advice from Paul Akins has helped you understand the concepts involved in implementing lean manufacturing.
Whether your goal is implementing lean manufacturing, improving your quality, improving your processes, or reducing management influence by empowering employees, lean offers tools to help you succeed.
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